Weekly Market Update Teleconference Transcript Thursday, June 17, 2015

Jim: Good day everyone, today is Wednesday, June 17, 2015 and this is the first Wednesday Ten-Minute Breather. Ten weeks ago we started these weekly calls, anticipating some negative changes in the stock and bond markets and for sure that is what we have seen, a lot of back and forth action in prices which doesn't help the investor confidence factor. These calls are to help smooth out the wrinkles of this volatile period of time.

Before I go into today’s comments, here are some thoughts from Bernie.

Bernie: Well Jim the kids are out of school and I'm feeling a little nostalgic today as my kids are yet another year closer to graduation, so I thought that a fitting topic would be Quality of Life. This means something a little bit different to everyone as everyone has their own definition of how they want to live, how they want to spend retirement, etc. Our goal is to help you maintain your "definition" of quality of life. We continue to focus on the cash flow spending as this helps us understand the financial side of activities that are important to you. The cash flow spending (expenses) are the only thing that we have control over in the "big financial" picture. We will continue to focus on this piece during our meetings with you and continue to try to help you achieve and maintain the "quality of life" as defined by you.

Our team also understands that it isn't only about the money there is a personal side as well. Each of you has your own unique family that can enhance your quality of life. My parents often tell me that they prefer being a "grandparent" to a "parent" all of the time. As they can give the grandkids back after they've given them ice-cream for dinner and don't have to deal with the consequences of the hyperactivity that follows. I encourage you to continue building those good memories with your grandkids as this will enhance your quality of life. I looked up a list of the top 100 things to do with grandkids and thought that I would share of few of these with you before turning the call over to Jim.

Teach your grandchild a hobby that you love – cooking, sewing, crocheting, golfing, etc. I remember the first outfit (and still have it by the way) that my grandmother helped me make on her sewing machine.
Collect seashells at the beach. Later paint them and maybe give them out as a favor at your next family gathering.
Go berry picking and then make a pie or cobbler.
Go on a nature walk and point out different birds, insects, etc.
Go on a scenic drive or visit a local park

With all the unfavorable news that is out there, we sometimes forget to stop and smell the roses. I encourage you to continue to let us do the worrying for you and take time to enjoy the things that matter the most so that you have the best quality of life. That is all that I have for today, I'll now turn the call over to Jim for some market comments and updates.

Jim: Thank you Bernie. Today's call is a summary of thoughts, ideas and observations of our head strategist Jeff Saut, our chief economist Scott Brown, no comments this week from Mike Gibbs the Raymond James Portfolio Manager, but I do have some combined thoughts from Dorsey Wright and our team and how we are responding in this market.

Jeff Saut in June 17th's Morning Tack; is talking about what a pause, a dip, a correction and a bear market look like. A pause is a pullback in prices in the stock market of about 5%, a dip is between 5% and 10%, a correction is greater than 10% and a bear market is a decline of more than 20%. It might interest you to know that we actually had a bear market in 2011 from May until October of almost 22%, a 17% correction from April 2010 to July 2010, and two other 10 percenters from April to June of 2012 and October 2011 to end of November 2011.

I am positive that if we asked the typical investor have there been any major declines, let alone a bear market, during the last six and a half years, the response would be no. What I find of interest is that these downturns in the market did not take long to flex their negative muscles and turn back around again. This goes back to a theme we have been talking about for the past two and a half months that these are characteristics of a secular bull market. A secular bull market is one that movers on sentiment more than economic reasoning and can go on for many years.

Scott Brown, our chief economist had comments this week on the Federal Reserve in June 17th's Raymond James Economic Research daily market commentary. He doesn't think the Fed will tip its hat on interest rate hike timing at all. He points out that even though there is a lot of noise and disagreement between the Federal Reserve's hawks and doves. The hawks are those calling to raise rates, the doves are calling to keep them low. The Federal Open Market Committee sets policy for fed funds rates, and while made up of some of the District governors, the governors whom we tend to hear more of their public views do not set this policy. Brown says the Fed is concerned about these items primarily:

They want to see further improvement in the job market
They want to be reasonably confident that inflation will stay close to the 2% goal
The timing is less important than the pace after the initial hike

Our work with Dorsey Wright, the company that supplies us the data for our research, shows a downturn in one of our positive indicators the NYSE Bullish percent that we reported on last week but we need to point out that that is but one indicator and all our remaining indicators remain positive. That warning allows us to double check all our current positions to make sure we are comfortable with how those are trading, we have and we have made a few appropriate changes.

Our indicators went into transition about 2 months ago. We note that utilities are off about 10% and a lot of that having to do with the interest rate increases in the market place, utilities being very interest rate sensitive. US equities, as we reported last week are still in number one favored position, followed by international, fixed income, currencies and commodities. Interest rates continue to nudge higher; the rates we follow are the 5 year, the 10 year and the 30 year treasury, all high yields since last week's call. We will continue to prune negative positions in our stock holdings, insert positive ones wherever possible and we continue to sit on our hands for fixed income ideas until the interest rate picture matures more.

Until next Wednesday, that's all the thoughts I have for today, are there any questions, comments or observations that any of you have on today's call?

Daily Commentary - Brown
Morning Tack

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